Labor Earnings in One-Company Towns: Theory and Evidence from Kazakhstan

One-company towns, characterized by the presence of a largeemployer in a local labor market, are a frequent legacy of state-leddevelopment strategies. How will downsizing or closing unprofitablestate-owned enterprises affect these towns?This article developsa simple model combining monopsony power in the labor marketwith a Keynesian closure of the product market and uses it tointerpret the findings of previous studies. The article evaluatesthe impact of the company's employment level on the town's laborearnings in Kazakhstan, where one-company towns are still prevalent.The evaluation is based on data from the 1996 Living StandardsMeasurement Survey. The results show that labor earnings inthe town decrease roughly 1.5 percent when the share of itspopulation working for the company decreases 1 percent. Theresults are robust to changes in the definition of labor earningsand to the inclusion of a variety of other community characteristicsin the analysis. These results and the theoretical model arecombined to evaluate the welfare impact of company downsizingand, consequently, to derive the optimal extent of labor retrenchment.     

Forecasting in a large macroeconomic system

This paper examines the efficiency gains yielded from estimating multiple equation cointegrated systems as compared to their single equation counterparts. In particular, this paper is concerned with the ability of utilizing the cointegrating information to improve forecasting performance. Recently an inability to improve forecasts of real income once money demand error correction terms were introduced has been used to argue that the M2 relationship had broken down during the early 1990s. However, the results suggest that once the underlying responses of variables are more closely investigated, the behaviour of M2 has remained stable.     

Technological Choice In Voluntary Standards Committees: An Empirical Analysis

Vendors frequently compete to have their technology adopted as part of a voluntary consensus standard. In this paper we report the results of an empirical study of the factors that influence the choice of technologies in voluntary technical standards committees.

Participation in standards committees is viewed as an aspect of the product development process of corporations involved in markets where network externalities are present. The factors hypothesized to affect the technology decision are: the market power of the coalition sponsoring the technology, the installed base of the products containing the technology, the size of the firms that make up the coalition, the promotional activities of the sponsors (such as technical contributions submitted), the perceived superiority of the technology, and the political skills of the coalition.

These hypotheses were tested by collecting data concerning specific technical decisions that were made in several standards committees in the area of computer communications hardware. Two sided t-tests were used to test the hypotheses, and logit regression was used to infer the importance of each factor in predicting adoption or non-adoption of the technology. A factor analysis was also performed to gain further insight into the data.

The results suggest that the size of the firms in the coalition supporting a technology and the extent to which they support their position through written contributions are significant determinants of technological choice in the standards decisions studied. The market share of the firms in the coalition was found to be significant only for the buyers of compatible products, i.e., the monopsony power was significant, not the monopoly power. In addition, the technologies whose sponsors weighted market factors more highly than technical factors were more likely to be adopted in the standards decision studied. The proponents of both the adopted and non-adopted technologies were found to have equal belief in the overall technical superiority of their technical alternative, even after the decision. The installed base of a technology and process skills were not found to be significant predictors of the committee outcome.     

Bare promises: An experiment

Is truth-value of a statement what lying aversion is all about? We propose an experimental test and find only limited support. In this context with ‘bare promises’, we also test for guilt aversion and again find only limited support.     

Information Asymmetry Determinants of Sarbanes-Oxley Wealth Effects

We investigate the roles of information asymmetry and governance in the wealth effects associated with passage of the Sarbanes-Oxley Act (SOX) for a sample of 1,158 firms. For events suggesting adoption of stringent reform legislation, we find more (less) favorable abnormal returns (ARs) for firms with high (low) information asymmetry and for firms with weak (strong) governance. More favorable effects could result from expected improvements for firms with high information asymmetry or weak governance. Firms with positive ARs experience information asymmetry reductions post-SOX, indicating the market was able to discern the firms that would most benefit from the legislation's passage.     

Contests and the Private Production of Public Goods

The private provision of public goods generally suffers from two types of efficiency failures: sorting problems (the wrong individuals contribute) and quantity problems (an inefficient amount is provided). Embedding the provision game into a contest that rewards larger contributions with higher probabilities of winning a prize may remedy such failures. Applications include tenure decisions at universities, electoral competition among politicians, etc. We identify a tradeoff between the value of the prize and the decisiveness of the contest. High‐powered incentives in contests may cause an overprovision of the public good or wasteful participation of unproductive individuals in the contest.     

HARVESTING VALUE FROM ENTREPRENEURIAL SUCCESS

This article discusses ways for entrepreneurs to gain liquidity from their businesses, either with or without a sale of the business. In today's financial arena there is a wide variety of methods and financing vehicles that can enable private companies to harvest liquidity to meet their own needs for growth, the consumption requirements of their founders, or the challenges of tax and estate planning. For companies with limited growth opportunities but fairly stable cash flows, the alternatives range from orderly liquidation to highly leveraged transfers of ownership such as those accomplished by leveraged buyouts, ESOPs, and mezzanine finance. For companies with abundant growth opportunities, value is typically maximized through sale to a strategic buyer or an initial public offering of equity (although a new hybrid called the "private IPO" has recently emerged that looks more like an LBO than an IPO).
In order to achieve its full potential, a company should be financed in such a way that enables it to continue through its natural business lifecycle, regardless of whether that matches the human lifecycle of its founder. So long as leadership succession can be arranged, the business lifecycle can determine the course of the company. Indeed, selling the business is the value-maximizing solution only if there is a strategic buyer willing to pay a premium above the business's stand-alone value, or if the founder wants to withdraw from the business and has no preferred successor.
Moreover, for the vast majority of companies, going public is not the recommended means for "cashing out." An IPO is likely to be a value-maximizing (and emotionally satisfying) experience only for (1) companies with valuable growth prospects that require funding for investment and (2) owner-entrepreneurs who are willing to subject themselves to the scrutiny and fluctuations of the market.